Alkem Laboratories

Pharmaceutical generics, formulations and neutraceutricals

Founded in 1973

Headquartered in Mumbai, Maharashtra

Sectors - Pharma

Listed in -December 2015

NSE Ticker - ALKEM

BSE Ticker - 539523

Potentially a consistent long term compounder

The simplest but most relevant analysis you will find on the Company. Read slowly, think carefully & you might agree !.... Do comment at the end for any clarification/ views.

Summary

Decent long term compounding story.

Sector Interest

😘 Flavor of the season.

Management

🙂 Good promoter driven Company with a solid professional board.

Financials

🙂 Decent business growth, stable margins, ok cash generation. Low debt.

Valuations

🙂 Closer to the lower end of historical valuation band.

Technicals

🙂 Long term chart broken out in Jan 20 and retested the breakout in Mar and May 20

Investor Interest

🙂 Decent. Institutions have been accumulating from public.

SWOT

Strengths
  • Amongst top ten pharma companies in India
  • Leadership position in anti infectives segment
  • Able management with strong professional board
  • Low net debt levels
  • Consistent business growth and stable margins
Weaknesses
  • Significant (40%) business is from overseas
  • Cash flow from operations are volatile vis-a-vis business growth and margins
  • Valuations are not overly attractive
Threats
  • Disruptions caused due to Covid2019. Surgeries are postponed impacting Company’s anti infectives
  • Regulatory approvals
Opportunities
  • Improving performance in the chronic therapy segments like Neuro / CNS, Derma and Anti-Diabetes
  • Significantly growing Vitamins/ Minerals / Nutrients segment. This segment shall continue to find more and more acceptance in the post Covid2019 world
  • As on March 31, 2020, the Company has filed a total of 144 ANDAs (including 2 NDA) with the US FDA and has received 89 approvals (including 13 tentative approvals and 2NDAs)

Management Quality

  • Alkem is currently run by Sandeep Singh (MD). He is from the promoter family and is associated with the Company since 2003.
  • Based on my reading so far, he seems reasonable and well regarded.
  • The pedigree of people on the Board further testifies towards the corporate governance standards at the Company.

Click here for Alkem’s Board of Directors

 

Financials

Auditors - B S R & Co. LLP
Bankers - Citi, HDFC, HSBC, Kotak Mahindra, SBI & others
Credit Rating -

Crisil (AA+ Stable, A1+), Fitch – IND A1+

  • Company has a strong credit rating
  • Revenues have grown consistently though with higher base the rate of growth is slowing down
  • Margins are stable and return on capital is good
  • Cash flow from operations have got hit in the current year but that maybe because of COVID2019 impact. I will be watching this very closely.
  • Debt levels are comfortable
  • Valuations are neither too low nor too high. From current levels, upside potential is more than significant downside risk. (Note: March 20 valuations are calculated at Rs 2,282/ share. Accordingly, please adjust the same as per current market price)

Important Links

Technicals

  • Company seems to be a decent performer and currently retesting it’s previous breakout levels.

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An actively managed portfolio - cross between fundamental and technical analysis
Disclaimer: The information presented above is no advice/ recommendation. Please do your own independent research before taking any investment related decision.
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Kavinder
Kavinder
1 year ago

Good and simple

Arvind Malhotra
Arvind Malhotra
1 year ago

Easy to understand .

Subramaniam Kartik
Subramaniam Kartik
1 year ago

Congrats to Inves4 for completing a year and wishing a long and successful journey ahead.
Really liked the lucid company review (Alkem) that you have posted.
The Summary, SWOT, analysis of Long term charts etc were quite useful in getting a comprehensive view of the Co. 

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